Any business today can have its own website or app. It's not just about creating any app or website, but one that attracts the right audience and serves your purpose. The cost of web and app development depends largely on the scope of the project and the development time. And when it comes to funding the project, in addition to traditional funding options, there is also the popular Code for Equity option. Code for equity means that contractors are paid for their work in part or in full with shares in the client company. It is similar in content to the tech for equity deal.
This is an interesting concept especially for startups with and SMEs with tight budgets. It can be extremely helpful for companies that are just starting out or that do not have their own IT department. It also offers such companies the opportunity to hire experts or agencies for the development process that would otherwise be out of their collar.
In this article, we'll talk in more detail about what Code for Equity is, what to look for in Code for Equity, and how much support you can expect. Let's get started!
What is the Code for Equity?
Those companies that want an app or website do not necessarily have the appropriate technical resources and financial means to be able to implement their plans. In such cases, external service providers can help achieve the desired result. They bring a critical perspective, and their expertise and specialization can also give you crucial competitive advantages for the project.
But everything has its price. So if external app agencies or web agencies help you with your web or app project, they need to be compensated according to their skills. However, it is not necessary to fund them using traditional methods. You can also fund them with company shares known as code for equity.
A method of financing in which one is compensated with company shares rather than money is thus referred to as code for equity.
Interjection: What is smart money?
The investments made by experienced investors who have a comprehensive understanding of the financial markets are called smart money. These experts can identify and predict the trends in the investment market before others.
Many people believe that the whole thing is a myth. They believe that people who manage and advise their clients' portfolios (asset managers) do no better (and some believe they do worse) than the average trend of the overall stock market over a given period.
In the context of venture capital, "smart money" is a term for investment. It encompasses the money that people invest in a company, along with their time, advice and knowledge of which company they are putting the money into. It is called "smart" because, in addition to the money, the company also receives the wisdom of the investors.
When money is simply invested without the time and knowledge of investors, it is called "dumb money" in venture capital terminology.
Interjection: smart money vs. typical investments
Investment means the use of assets to achieve an increase in value over a period of time. Investing currently requires giving up some assets, such as time, money, or effort. Investing means earning a return on the assets invested.
But not every investment you make now will bring you the right value in the future. It is important to invest in the right assets.
When you hire some experts to invest money in the right assets that will bring you the right value over time, this is called smart money.
What should the contractor look for in Code for Equity?
If you are an app developer or app agency and decide to receive funding from a company through a code for equity deal, you need to consider the following aspects:
Experienced and established company
It is always advisable to acquire shares in a well-known or established company. This will help you in the long run as your investment returns will depend on the success or failure of the company or business.
Professional team
Take a look at the company's team. The success of a company also depends on its team. It is extremely important to have a team that is knowledgeable and also cooperative. This will help you in the development of the project and also after its completion.
When does Code for Equity make sense for me as a client?
As a startup, you may be thinking about when is the best time to do a code for equity deal. Here are some pointers that might help you find the perfect time:
Proven competence
Once you start building your team and are looking for the right talent for your business, you can start hiring App Developers or Web Developers with a code for equity deal. Code for Equity should not be based on frequent hiring and firing (hire & fire).
Clear ideas
Once you have a clear idea of what problem you want to solve and what you want to develop, it's the right time to bring in those who can help you on your journey and develop a great product. User experience plays a big role in product development. That's why it's important to hire a company or people who have a similar thought process as you and share a code for equity with them. They might even help you if you need to update or redesign your product in the long run.
Proof of concept
A proof of concept (POC) is about determining whether an idea can be turned into reality. Once you have completed your proof of concept, this is another indication that you should hire a team of experts with a code for equity.
Availability of financial resources
Funding not only helps you hire employees, but also helps you grow other areas of your business. Funding from reputable investors will also help you attract the right talent with a code for equity.
How much support can I expect from a Code for Equity deal?
Advice to contractors - hybrid of cash & equity
The tasks and responsibilities of an app development agency operating on a Code for Equity basis remain the same regardless of how they are paid. Even with Code for Equity, they must develop an app or website that is worth the amount invested by the company.
Contractors have their performance paid for either in part or in full with company shares as equity. Contractors are advised to never take 100 % of the cost of performance as code for equity. Drive hybrid: take part cash and part as equity.
Payments are indispensable
Several contractors (freelancers, agencies) offer Code for Equity as a financing option. Even if you provide Code for Equity as payment for their services, a lump sum must also be paid again and again. Namely, as soon as the client company generates revenue, it must regularly pay the amount corresponding to the contractor's percentage share.
appleute and Code for Equity
Without an experienced team, your project is doomed to fail. You need a team that is as invested in your business as you are. And that's exactly what we do. We help startups and enterprises build software and apps, and even offer a code for equity deal if necessary.
We are an experienced web and mobile app development and design agency. We have over years of experience in helping startups, SMEs and larger companies develop digital solutions and increase their KPIs.
We have the best software and app developers in our agency. We use the latest technology for web and mobile app development from front-end to back-end. We can help with native and hybrid mobile app development.
In addition to the cash option, we are open to code for equity deals, as noted. As a rule, we take a stake of 0.5%-7.5% in the company, depending on the valuation of the existing concept.
Contact us today to discuss this!
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